Key points:
- The Direxion Semiconductor Bear ETF (SOXS) soared by 912%.
- The move was triggered by the fund's 10 for 1 reverse stock split.
- Investors should not hold inverse short ETFs for long since they lose value.
The Direxion Daily Semiconductor Bear 3X Shares (NYSEARCA: SOXS) surged 912% after the ETF issuer implemented a 10 for 1 reverse stock split to boost its share price.
The SOXS ETF stock price soared over 900% after the ETF issuer reduced the outstanding shares by 90% to boost the ETF's stock price.
Also read: The Best Performing ETFs in 2022.
As an inverse bearish ETF, the ETF's target is to generate a 300% inverse return to the underlying index it tracks, the ICE Semiconductor Index (ICESEMIT), since investors cannot invest in an index directly.
SOXS's target is to achieve a 3X negative return of the ICE Semiconductor ETFs movements daily as a bear inverse ETF.
As previously mentioned, it is never a good idea to hold inverse ETFs for more than a day since they tend to lose money over the long term leading to multiple reverse stock splits.
Investors who want to buy the SOXS ETF should keep in mind that the fund's prospectus warns investors that the ETF will not reflect the index's overall performance it tracks over a long period; instead, its primary goal is to attain a daily return.
Therefore, the SOXS ETF mainly targets traders who want to profit daily from specific moves in the underlying index. Such traders can avoid the long term effect of losing money by opening and closing their positions within the same day.
The latest 10-1 reverse stock split was approved by the Board of Trustees of the Direxion Shares ETF Trust in February, with the split coming into effect today.
The split gives investors interested in profiting from SOXS daily more room for their trades to play out.
Long term investors are best served to avoid inverse ETFs altogether unless for hedging purposes, and short ETFs are known as value destroyers over time.
*This is not investment advice. Always do your due diligence before making investment decisions.
The Direxion Semiconductor (SOXS) stock price.
The Direxion Semiconductor Bear 3X (SOXS) stock price soared 912% today to trade at $35.14, rising from Friday's closing price of $3.49.